If 2023 was the year of AI chatbots in the tech industry, 2024 will be the year of AI plumbing. It may not sound all that exciting, but tens of billions of dollars are rapidly being spent on the technology behind the industry’s AI boom.
Companies from Amazon to Meta are retrofitting their data centers to support artificial intelligence. They are investing in huge new facilities, and even countries like Saudi Arabia are racing to build supercomputers to process AI. Almost everyone who has a foot in technology or a large amount of money seems to be jumping into a spending frenzy that some believe will last for a long time. Year.
Microsoft, Meta and Google’s parent company Alphabet said this week that they spent more than $32 billion on data centers and other capital expenditures in the first three months of this year alone. The companies said on conference calls with investors that they have no plans to slow down AI investments.
In the clearest sign of how AI is becoming a story about building technology infrastructure at scale, Meta Inc. on Wednesday said it would spend billions more on chips and data centers for AI than it had previously said. He said he needed to spend a lot.
“I think it makes sense to work on that, and we’re going to do that,” Meta CEO Mark Zuckerberg said on a conference call with investors.
This staggering spending reflects an old Silicon Valley analogy. The people who made the most wealth during the California gold rush were not the miners, but the people who sold shovels. His Nvidia, whose chip sales more than tripled last year, is undoubtedly AI’s clearest winner.
The money being poured into technologies that support artificial intelligence is also reminiscent of the spending patterns of the dot-com boom of the 1990s. For all the excitement about web browsers and new e-commerce websites, the companies that are actually making money are software giants like Microsoft and Oracle, chipmaker Intel, and the companies that make the equipment that connects those new computer networks. It was Cisco Systems.
But cloud computing brings new challenges. The biggest companies in the technology industry are now spending large sums of money to attract customers, as most startups and even large companies in other industries contract with cloud computing providers to host their networks. I’m casting.
The company said Google’s capital spending (mainly money spent on data center construction and equipment) nearly doubled in the first quarter. Microsoft rose 22%. Amazon, which reports earnings on Tuesday, is expected to further fuel its growth.
Meta investors were unhappy with Zuckerberg, and the company’s stock price fell more than 16% after the call. But just a few years ago, Mr. Zuckerberg was humiliated by shareholders for planning to spend heavily on augmented and virtual reality, and he has been criticized for the money his company is putting into AI. It probably called for years of patience.
“Our optimism and ambition has grown considerably,” he said.
Investors were fine with Microsoft’s spending. Microsoft is the only major tech company to report financial details for its generative AI business, which the company says contributes to more than a fifth of the growth in its cloud computing business. Analysts estimate that amount reached $1 billion in three months.
Microsoft said its generative AI business could have been even bigger if it had enough data center supply to meet demand, emphasizing the need to keep building.
Investments in AI are fueling Microsoft’s core cloud computing product, Azure, and helping it attract new customers. “Azure has become the go-to for almost everyone working on AI projects,” he said Thursday, Microsoft CEO Satya Nadella.
(The New York Times sued Microsoft and its partner OpenAI in December, alleging copyright infringement of news content related to its AI systems.)
Google announced that its cloud division’s revenue increased 28%, including “increased contributions from AI.”
Amazon CEO Andy Jassy said in a letter to shareholders this month that while much attention has been paid to AI applications such as ChatGPT, there are opportunities for further technology initiatives around infrastructure and data. “It’s huge,” he said.
When it comes to computing infrastructure, “the key is the chip inside,” he said, and lowering costs and getting more performance out of the chip is key to Amazon’s efforts to develop its own AI chips. he emphasized.
Infrastructure demands generally fall into two buckets. First, there is the largest scale of cutting-edge model construction, with some AI developers saying that each new round could soon take him above $1 billion. Chief executives said that to remain at the forefront of AI, it is essential that they can work directly or with partners to develop cutting-edge systems.
And then there’s what we call inference, which is querying the model in order to actually use it. This may involve customers leveraging systems, such as an insurance company that uses generative AI to summarize customer complaints. Or companies themselves might incorporate his AI directly into their products, as Meta recently did by embedding chatbot assistants on Facebook and Instagram. It’s also expensive.
Building and equipping a data center takes time. Chips are facing supply shortages and rising manufacturing costs. With such long-term bets, Susan Lee, Meta’s finance director, said the company is building for “fungibility.” If the future turns out not to be as expected, we want to leave room to change how we use our infrastructure.
